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India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. The banking regulator has allowed new entities such as payments banks to be created recently thereby adding to the types of entities operating in the sector. However, the financial sector in India is predominantly a banking sector with commercial banks accounting for more than 64 per cent of the total assets held by the financial system.

The Government of India has introduced several reforms to liberalize, regulate and enhance this industry. The Government and Reserve Bank of India (RBI) have taken various measures to facilitate easy access to finance for Micro, Small and Medium Enterprises (MSMEs). These measures include launching Credit Guarantee Fund Scheme for Micro and Small Enterprises, issuing guideline to banks regarding collateral requirements and setting up a Micro Units Development and Refinance Agency (MUDRA). With a combined push by both government and private sector, India is undoubtedly one of the world’s most vibrant capital markets.

Market Size

Total outstanding credit by scheduled commercial banks of India stood at US$ 1.06 trillion! The Association of Mutual Funds in India (AMFI) data show that assets of the mutual fund industry have reached a size of Rs. 12.62 trillion (US$ 185 billion). During April 2015 to February 2016 period, the life insurance industry recorded a new premium income of Rs 1.072 trillion (US$ 15.75 billion), indicating a growth rate of 18.3 per cent. The general insurance industry recorded a 14.1 per cent growth in Gross Direct Premium underwritten in FY2016 up to the month of February 2016 at Rs. 864.2 billion (US$ 12.7 billion).

India’s life insurance sector is the biggest in the world with about 360 million policies, which are expected to increase at a Compounded Annual Growth Rate (CAGR) of 12-15 per cent over the next five years. The insurance industry is planning to hike penetration levels to five per cent by 2020, and could top the US$ 1 trillion mark in the next seven years. The total market size of India’s insurance sector is projected to touch US$ 350-400 billion by 2020.

India is the fifteenth largest insurance market in the world in terms of premium volume, and has the potential to grow exponentially in the coming years. Life insurance penetration in India is just 3.9 per cent of GDP, more than doubled from 2000. A fast growing economy, rising income levels and improving life expectancy rates are some of the many favorable factors that are likely to boost growth in the sector in the coming years.

Investment corpus in India’s pension sector is expected to cross US$ 1 trillion by 2025, following the passage of the Pension Fund Regulatory and Development Authority (PFRDA) Act 2013.

Investments/Developments

The Securities and Exchange Board of India (SEBI) plans to gradually introduce more commodity products and allow more participants in the commodity derivatives market in India.

The Reserve Bank of India (RBI) has granted in-principle licenses to 10 applicants to open small finance banks, which will help expanding access to financial services in rural and semi-urban areas, thereby giving fillip to Prime Minister’s financial inclusion initiative.

The Reserve Bank of India (RBI) has also given in-principle approval to 11 entities to open payment banks which are expected to result in widening the reach of banking services and thereby improve the extent of financial inclusion as envisaged by the government. The setting up of 11 new payments banks can potentially free up Rs 1,400,000 crore (US$ 205.4 billion) per annum to fund the infrastructure sector, as per a study by the State Bank of India.

India’s largest microfinance company Bandhan has set up Bandhan Bank Ltd, banking and financial services company, post the receipt of license from RBI.

Government Initiatives

Several measures have been outlined in the Union Budget 2016-17 that aim at reviving and accelerating investment which, inter alia, include fiscal consolidation with emphasis on expenditure reforms and continuation of fiscal reforms with rationalization of tax structure.

The Union Budget 2016-17 has allowed foreign investment in the insurance and pension sectors in the automatic route up to 49 per cent subject to the extant guidelines on Indian management and control to be verified by the regulators.

Service tax on service of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority (PFRDA) being exempted, with effect from April 01, 2016.

Capital gains tax exemptions have been extended to merger of different plans within a mutual fund scheme, which is expected to benefit investors in case of merger of mutual fund schemes.

The Government of India plans to revise and improve few of its flagship schemes such as the Atal Pension Yojana (APY), aimed at providing pension coverage, and Pradhan Mantri Mudra Yojana, which funds small entrepreneurs, in Union Budget 2016-17 in order to increase the number of beneficiaries covered by these schemes and overcome shortcomings in implementation.

The Government has also announced several schemes to improve the extent of financial inclusion. The Prime Minister of India has launched the Micro Unit Development and Refinance Agency (MUDRA) to fund and promote Microfinance Institutions (MFIs), which would in turn provide loans to small and vulnerable sections of the business community. Financial Services Secretary Mr Hasmukh Adhia has announced that the ministry will launch a campaign for loans under Pradhan Mantri Mudra Yojana (PMMY) in order to double loan disbursement to the small business sector to over Rs 100,000 crore (US$ 14.67 billion).

Government of India’s ‘Jan Dhan’ initiative for financial inclusion is gaining momentum. Under Pradhan Mantri Jan DhanYojna (PMJDY), 210 million accounts# have been opened and 174.6 million RuPay debit cards have been issued. Government of India aims to extend insurance, pension and credit facilities to those excluded from these benefits under the Pradhan Mantri Jan Dhan Yojana (PMJDY). The Union Cabinet Minister has also approved the Pradhan Mantri Suraksha Bima Yojana which will provide affordable personal accident and life cover to a vast population.

Minister of Finance Mr Arun Jaitley has formally declared the merger of Forward Markets Commission (FMC) with Securities and Exchange Board of India (SEBI), which help convergence of regulations in the commodities and equity derivatives markets.

The Insurance Regulatory and Development Authority of India (IRDA), as part of its endeavour to increase insurance sector growth, has allowed a new distribution avenue called the ‘point of sale’ person, who will be allowed to sell simple standardised insurance products in the non-life and health insurance segments, which are largely pre-underwritten.

Is the financial sector’s asset quality getting worse or better?

At a press conference on Tuesday, 26 April, after declaring the fourth quarter earnings for financial year (FY) 2015-16, Rajiv Lall, chief executive officer of IDFC Bank Ltd, interrupted his chief financial officer to make a point. The bank had just reported a jump in gross non-performing assets (NPAs) to 6.16% from 3.09% in the previous quarter. The question was on this surge in bad loans. Television channels were running tickers saying “Asset quality worsens”. Lall interjected. “An increase in the gross NPA number doesn’t mean that asset quality has worsened. We have provided for all these bad loans. So asset quality is actually improving,” said Lall.

Lall’s comment makes for an interesting debate at a time when most banks are reporting an increase in their reported bad loans. Should we see this recognition (which, by the way, is the result of a regulatory diktat) of stressed assets as a positive and argue that asset quality management at banks is improving? Or should we be alarmed at the level of stressed assets that have existed in the system without an upfront declaration?

Bankers argue that it is the former. Their contention is that they were following the law of the land and classifying loans as NPAs when dues were delayed by more than 90 days. That’s what the Reserve Bank of India (RBI) rule says. Never mind that companies had made a habit of delaying payments till virtually the last day. Let’s also ignore the fact that the asset quality review conducted by RBI detected questionable practices such as round-tripping of funds by companies and the repayment of short-term loans through overdraft facilities. All this was leading to an understatement of bad loans in the system and hence inadequate provisions.

Now that RBI has tightened its stance, we are doing as the regulator tells us, bankers say. Sure. But, the point worth noting here is that RBI has actually not changed any rules. It is just ensuring that rules are followed and that they are followed in the spirit of the law rather than the letter.

An analyst who covers the banking sector scoffed at the idea that this process of purging (so to speak) should bring greater confidence around the asset quality of banks. It’s like putting a band aid on an injury and saying that there was no injury to begin with, said this analyst requesting anonymity.

It’s true that the aftermath of the asset quality review is giving us a clearer picture of what lies within the banking sector. But it equally makes us question why banks were not disclosing this picture to begin with and why RBI’s bank supervision department didn’t catch this earlier. Even if you find that argument subjective, there are other reasons to believe that the worst of the asset quality problems are not behind us.

On 22 April, The Financial Express, reported, based on RBI data, that more than Rs.3 trillion in loans are classified under the SMA-1 category (accounts where repayments are overdue by 30-60 days) and another Rs.3 trillion in loans are in the SMA-2 category (accounts where repayments are overdue by 60-90 days). It is only reasonable and prudent to expect that some part of this will find its way into the NPA bucket over the course of this year. As of end-December 2015 quarter, gross NPAs of the 39 listed banks were at Rs.4.38 trillion. This number is sure to rise—both because of the one-time hit from the asset quality review and also due to the organic growth in NPAs.

There is another reason to be cautious. The asset quality review has so far only revealed the asset quality picture of banks. What about non-banking finance companies (NBFCs)? Do NBFCs have similar issues hidden in their books? According to RBI’s December Financial Stability Review (FSR), there were 11,781 NBFCs registered with RBI. Of these, there are 210 Systemically Important Non-Deposit accepting NBFCs (NBFCs-NDSI). The aggregate loans and advances of the sector grew by 14.2% year-on-year in September 2015, after a 16.3% growth in March. The gross NPAs of the NBFC segment were at 3.5% as of September, says the FSR.

To be sure, the NPA rules for NBFCs are less stringent than those prescribed to banks. Until last fiscal, only accounts overdue by more than 180 days were classified as bad loans at NBFCs. This will be brought in line with the 90-day NPA rule that banks adhere to in stages by March 2018. Even so, RBI would do well to scrutinize the balance sheets of NBFCs, particularly those lending to sectors such as infrastructure that have been the source of a lot of stress.

There is also the issue of the asset quality of Life Insurance Corp. of India’s (LIC’s) debt portfolio. On Thursday, 28 April, Mint’s Ravi Krishnan highlighted the potential concerns emerging from LIC’s lending activities. RBI, together with the Insurance Regulatory and Development Authority of India, may need to comb through LIC’s books as well to snuff out any asset quality concerns that may exist there.

To sum up, despite what bankers say, it’s going to be a while before anyone can confidently say that the asset quality of the Indian financial sector is improving. And no, most don’t see the current coming-out of bad loans as a positive.

Bankruptcy Code

The Insolvency and Bankruptcy Code will help improve the ease of doing business and will be a big positive for the banking sector as it aims to ensure a consolidated legal framework for resolving bankruptcy, says a Nomura report.

Rajya Sabha or the Upper House of Parliament on 11th May passed the Bankruptcy Code, paving the way for India to have the law.

“India currently ranks 136 in the World Bank’s resolving insolvency ranking; it takes 4.3 years to resolve insolvency and the recovery rate (at 25.7 cents to a dollar) is very low. Therefore, a consolidated legal framework for resolving bankruptcy will play a key role in improving the ease of doing business in India,” Nomura said.

According to the report, there are multiple laws dealing with insolvency in India, which lead to delays. This Code will consolidate the existing framework and create a new institutional structure, including setting a time-limit of 180 days within which the resolution has to be completed.

Moreover, the Code is a big positive for the banking sector, which is currently burdened with stressed assets. As it gives banks (creditors) a legal path for recovering their dues in a time-bound manner, it said, adding that “it should make lenders more confident in lending and borrowers more accountable”.

“Overall, the Code is a very positive financial sector reform,” the report added.

The Lok Sabha had passed the Bill on May 5. As it has now been passed by both the houses of Parliament, India will have a bankruptcy law once the President signs the legislation.

The Code has enabled provisions to deal with cross border insolvency and establish an ‘Insolvency and Bankruptcy Board of India’ to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and information utilities.

India is today one of the most vibrant global economies, on the back of robust banking and insurance sectors. The country is projected to become the fifth largest banking sector globally by 2020, as per a joint report by KPMG-Confederation of Indian Industry (CII). The report also expects bank credit to grow at a Compound Annual Growth Rate (CAGR) of 17 per cent in the medium term leading to better credit penetration. Life Insurance Council, the industry body of life insurers in the country also projects a CAGR of 12–15 per cent over the next few years for the financial services segment.

Also, the relaxation of foreign investment rules has received a positive response from the insurance sector, with many companies announcing plans to increase their stakes in joint ventures with Indian companies. Over the coming quarters there could be a series of joint venture deals between global insurance giants and local players. The relaxation in the foreign direct investment (FDI) limit to 49 per cent can result in additional investments up to Rs 60,000 crore (US$8.81 billion).

Today, on 29th Feb 2016, Finance Minister Arun Jaitley presents his third Union Budget. In the words or our PM Sri Narendra Modi, Budget 2016 is close to dreams of people. He said its biggest focus is on villages, poor people, farmers, women and youth to ensure a qualitative change in their lives and alleviate poverty through a slew of time-bound programmes.

The positives– In my opinion, this budget is for the real economy, meant for fiscal consolidation and financial inclusion. The two clear positives from the Budget are: the government sticking to fiscal deficit target and not tinkering with the long-term capital gain tax. Bets are on Bharat rather than India.

Points to notice– The growth of GDP has now accelerated to 7.6%.
CPI inflation was at 9.4% during the last three years of the previous Government. Under present Government, CPI inflation has come down to 5.4%, providing big relief to the public.
The Current Account deficit has declined from 18.4 billion US dollars in the first half of last year to 14.4 billion this year. It is projected to be 1.4% of GDP at the end of this year. Our foreign exchange reserves are at the highest ever level of about 350 billion US dollars.

To make things clear, I am separating the budget into following three parts:

The Good– The budget has laid special emphasis on enhancing expenditure in farm & rural, and social sector including healthcare, education, skill development, job creation and infrastructure. There is a clear focus on rural India at a time when there is so much distress in the villages. The combined capital spending on roads and railways will be Rs.2.18 trillion. There will likely be strong multiplier effects in terms of demand for inputs as well as labour. Through the year, significant number of projects languishing due to various factors were also taken up for being put on track. The budget has also signalled a stability in the tax regime. It has addressed a long standing demand from the Asset Reconstruction Companies (ARCs). Enabling sponsors to hold up to 100% stake in an ARC and allowing 100% FDI in ARCs through automatic route will open up avenues for ARCs and facilitate them to strengthen the capital base and effectively participate in the huge NPA market in India. Phasing out corporate tax exemptions is another welcome step. In a relief to individual tax payers, Finance Minister Arun Jaitley on Monday increased the tax deduction limit to Rs 60,000 per annum from the current Rs 24,000 on the housing rent. Jaitley has also proposed to make withdrawal up to 40% of the corpus at the time of retirement tax exempt in the case of National Pension Scheme (NPS). For non-residents, providing alternative documents to PAN Card will be allowed and TDS provisions for Income Tax will be rationalized.

The Bad– Sectors like power generation, renewable energy, water and effluent treatment did not receive the much needed attention. The allocation for port development at Rs 8 bn is surprisingly modest considering the vision of the Bharatmala programme. Again, the Government has provided only Rs 25,000 crore towards bank recapitalization, (although the FM has indicated determination to infuse more funds if required). Also no major tax reforms (in particular, the same tax slabs as earlier) raise questions. While the budget is structurally positive in medium term, no room to spend and a tight fiscal stance could act as a dampener for capital markets.

The Ugly– There have been limited moves to address the problem of bad loans that have clogged up the banks. The government will have to work with the central bank to clean up the mess. Still, it is particularly good to see that the finance minister has not been tempted by the idea of a bad bank. Middle class urban consumers have to pay more as everything from branded garments, jewelry to cars and cigarettes more expensive. In his speech, the FM spoke about the government paying the employer’s contribution of 8.33% towards the Employees’ Pension Scheme for those earning up to 15,000 per month. But he didn’t spell out a major change he has introduced in the Employees’ Provident Fund (EPF) which affects thousands of subscribers. From fiscal 2017, 60% of your EPF after retirement will become taxable, it emerges from the finance minister’s budget speech. Right now, EPF is 100% tax-free because it is an exempt-exempt-exempt or EEE product, which means it is exempt from tax at all three stages of investing, accumulation and withdrawal. This will no longer be so.

Challenges– The main challenge will be on the numbers front. Nominal GDP growth is expected to increase from 8.6% in fiscal year 2016 to 11% in fiscal year 2017. Much depends on this assumption. The primary deficit also has to be watched closely at a time when this government does not have the usual option of inflating away its debt. Most important of all, a helping hand of opposition parties is required to achieve the dream but then I know that it is too much to ask for. By the initial reactions coming from various parties, they are clueless in finding any fault with the budget, instead terming it as an election focused one. IMO, ranting about the neglected states, economic sectors and so on can be ignored.

Conclusion– In short, the budget has lots of small ideas that we hope somehow fit into a bigger economic strategy rather than just headline-grabbing political narratives. The subsidy route has been avoided (efficient spending) while thrust is on job creation. A lot depends on implementation. The Government should follow the Budget with decisive policies actions round the year if real fruits of economic expansion are to be realized. Secondly, without losing focus on the inflation target, the monetary policies should also support the Government’s growth agenda in these challenging times. Lastly, a properly functioning legislature will be the perfect tailwind to re-energizing India’s growth story. And, of course, it needs to be seen whether RBI Governor Raghuram Rajan is convinced enough by the fiscal situation to begin a second round of rate cuts. If you ask me to rate the budget on a scale of 10, I will give it 7.5 marks.

Disclaimer– I have relied upon the information that I got through various print and electronic media and hence sorry for any error that might have slipped into the article.

Your comments are valuable and most welcome ! 🙂

Finance Minister Arun Jaitley with Minister of State for Finance Jayant Sinha

Today is the last day of January and I find it to be a good time to clear the rumors that happened around the changes in Google core ranking algorithm about three weeks earlier.

We’re currently seeing one of the biggest and most dramatic changes in Google rankings we’ve seen in the last few years. At first I was guessing it’s the promised real time Google Penguin roll out, but all the reports seem to say that it’s multi-faceted and not really tied purely to links. In this post I’ll explain what I know right now…

There’s a simple reason why everyone (including me) thought this was a Google Penguin roll out: Google has been talking about an upcoming real time Google Penguin update for monthsand has said, through several people, that it’d come early this year.

For your information, Google Penguin is a codename for a Google algorithm update that was first announced on April 24, 2012. The update is aimed at decreasing search engine rankings of websites that violate Google’s Webmaster Guidelines by using now declared black-hat SEO techniques involved in increasing artificially the ranking of a webpage by manipulating the number of links pointing to the page. Basically, Google Penguin changes how links are evaluated.

Finally, on 12 Jan, Google confirmed that there was a core ranking change but unrelated to Penguin. So what exactly was it? Well, Google Panda is now part of Google’s Core Ranking Algorithm. Google Panda is a change to Google’s search results ranking algorithm that was first released in February 2011. The change aimed to lower the rank of “low-quality sites” or “thin sites” and return higher-quality sites near the top of the search results. The name “Panda” comes from Google engineer Navneet Panda, who developed the technology that made it possible for Google to create and implement the algorithm.

Webmasters were expecting years ago for Panda to run in real time. I don’t think it is now, but it is part of their core ranking update. (I am not saying Panda is real time, I just doubt if core ranking is real time). So, we will never see another Panda update like we did in the past!!

Personally, I feel that now is the best time to clear confusions about the Panda update. So, here are what I consider to be the top new takeaways from Google about the Panda algorithm.

First, the Panda algorithm is specifically about content. It’s not about links, it’s not about mobile-friendliness, it’s not about having an HTTPS site. Rather, the Panda algorithm rewards great-quality content by demoting content that’s either quite spammy in nature or that’s simply not very good.

Removing good contents

One big issue is that many SEOs have been promoting the widespread removal of content from websites that were hit by Panda. In actuality, however, what many webmasters don’t realize is that they could be shooting themselves in the foot by doing this.

When performing content audits, many penalty experts will cut a wide swath through the site’s content and remove it. Whether claiming that X% of content needs to be removed to recover from Panda or that older, less fresh content needs to be removed, doing this without the proper research will cause rankings to decrease even further. It’s never a “sure-fire Panda recovery tactic,” despite what some might say.

Unfortunately for SEOs, there’s no magic formula to recover from Panda when it comes to the quantity, age, or length of the content on the site. Instead, you need to look at each page to determine its value. The last thing you want to do is remove pages that are actually helping.

Fortunately, we have the tools to be able to determine the “good versus bad” when it comes to figuring out what Google considers quality. And the answer is in both Google Analytics (or whatever your preferred site analytics program is) and in Google Search Console.

If Google is sending traffic to a page, then it considers it quality enough to rank. If you were going to remove one of these pages because it was written a few years ago or because it was below a magic word count threshold, you would lose all the future traffic Google would send to that page.

If you’re determined to remove content, at least verify that Google isn’t sending those pages’ traffic before you add to your Panda problems by losing more traffic.

Matching content with the search query

We all laugh when we see the funny keywords people search for. However, part of providing quality content is also delivering those content expectations. In other words, if a search is repeatedly bringing visitors to a specific page, you’ll want to make sure that page delivers the promised content.

So if your site has been impacted by Panda — or you’re concerned it might be and want to be proactive — start matching up popular queries with their pages, making sure you’re fully delivering on those content query expectations. While this won’t be as big of a concern for sites not impacted by Panda, it’s something to keep in mind if you do notice those “odd” keywords popping up with frequency.

Ensuring your content matches the query is also one of the easiest Panda fixes you can do, although it might take some legwork to spot those queries that under-deliver. Often, it’s just a matter of slightly tweaking a paragraph or two, or adding an additional few paragraphs to change the content for those queries from “nah” to “awesome.” And if you deliver that content on the visitor’s landing page, it means they’re more likely to stick around, view more of your content, and share it with others — rather than hitting the back button to find a page that does answer their query.

Fixing Vs Removing

“Fixing” versus “removing” is another area where many experts disagree. Luckily, it’s been one of the areas that Google has been pretty vocal about if you know where to find those comments.

Google has been a long-time advocate of fixing poor quality content. Both Gary Illyes and John Mueller have repeatedly talked about improving the quality of content.

In a hangout, John Mueller said:

Overall, the quality of the site should be significantly improved so we can trust the content. Sometimes what we see with a site like that will have a lot of thin content, maybe there’s content you are aggregating from other sources, maybe there’s user-generated content where people are submitting articles that are kind of low quality, and those are all the things you might want to look at and say what can I do; on the one hand, hand if I want to keep these articles, maybe prevent these from appearing in search.

Now, there are always edge cases, and this is what many experts get hung up on. The important thing to remember is that Google’s not talking about those weird, random edge cases, but rather what applies to most websites.

If you do have thin content that you’ll want to upgrade in the future, you can always noindex it for now. If it’s not indexable by Google, it’s not going to hurt you, from a Panda perspective. However, it’s important to note that you still need to have enough quality content on your site, even if you’re noindexing or removing the bad stuff.

This is also what Google recommended in the Panda Algo Guide:

A Google spokesperson also said this, when referring to lower quality pages. “Instead of deleting those pages, your goal should be to create pages that don’t fall in that category: pages that provide unique value for your users who would trust your site in the future when they see it in the results.”

Ranking with Panda

One of the most surprising revelations from Google is that sites can still rank while being affected by Panda. While there are certainly instances where Panda impacts an entire site, and this is probably true in the majority of cases, it is possible that only some pages are negatively impacted by Panda. This is yet another reason you want to be careful when removing pages.

From the Panda Algo Guide:

What most people are seeing are sites that have content that is overwhelmingly poor quality, so it can seem that an entire site is affected. But if a site does have quality content on a page, those pages can continue to rank.

A Google spokesperson confirmed this as well.

The Panda algorithm may continue to show such a site for more specific and highly-relevant queries, but its visibility will be reduced for queries where the site owner’s benefit is disproportionate to the user’s benefit.

This comment reinforces the idea from Google that a key part of Panda is where Google feels the site owner is getting the most benefit from a visitor to their site, rather than vice-versa.

Duplicate content

One of the first things that webmasters do when they get hit by Panda is freak out over duplicate content. And while managing your duplicate content is always a good idea from a technical standpoint, it doesn’t actually play any kind of a role in Panda, as confirmed by John Mueller late last year.

And even then, John Mueller described fixing duplicate content on a priority scale as “somewhere in the sidebar or even quite low on the list.” In other words, focus on what Panda is impacting first, then clean up the non-Panda related technical details at the end.

Bottom line: Duplicate content can certainly affect your SEO. But from a Panda perspective, if your main focus is on getting your site ranking well again in Google after a Panda hit, leave it until the end. Google is usually pretty good about sorting it out, and if not, it’s fixable with either some redirects or canonicals.

Word count

Many webmasters fixate on the idea that content has to be a certain number of words to be deemed “Panda-proof.” There are plenty of instances of thousand-word articles that are extremely poor quality, and other examples of content so great that even having only a hundred or so words will trigger a featured snippet… something Google tends to give only to higher-quality sites.

Now, if you’re writing content, there’s nothing wrong with trying to set up certain benchmarks for the number of words — especially if you have contributors or you’re hiring writers. There’s no issue with that. The issue is with falsely believing that word count is related to quality, both in Google’s eyes and from the Panda algo perspective.

It’s very dangerous to assume that because an article or post is under a specific word count that it needs to be removed or improved. Instead, as with the case of considering whether you should remove content, look to see whether Google is sending referrals to those pages. If they’re ranking and receiving traffic from Google, word count is not an issue.

Advertising & affiliate links

The role that both advertising and affiliate links play in Google Panda is an interesting one. This isn’t to say that all advertising is bad or all affiliate links are bad. The problem is the content surrounding it — how much there is and what it’s like.

Where there’s an impact is in the amount of advertising and affiliate links. Will Google consider a page that is essentially just affiliate links without any quality content as good? It’s not that Panda is specifically targeting ads or affiliate content. There are lots of awesome affiliate sites out there that rank really well and are not affected by Panda whatsoever.

The problem lies in the disconnect between the balance of useful content and monetization. As Gary Illyes said, the value to the visitor should be higher than the value to the site owner. But as we see on many sites, that balance has tipped the other way, where the visitor is seen merely as a means of revenue, without concern about giving that visitor any value back.

You don’t need to hit your visitors over the head with a huge amount of advertising and affiliate links to make money. That visitor brings a lot of additional value to your site when they don’t feel your site is too ad heavy. From the Panda Algo Guide:

There are also benefits from traffic even if it doesn’t convert into a click on an affiliate link. Maybe they share it on social media, maybe they recommend it to someone, or they return at a later time, remembering the good user experience from the previous visit.

A Google spokesperson also said, “Users not only remember but also voluntarily spread the word about the quality of the site, because the content is produced with care, it’s original, and shows that the author is truly an expert in the topic of the site.” And this is where many affiliate sites run into problems.

There’s another thing that often happens when a website is hit by Panda: naturally, the revenue from the ads they do have on the site goes down. Unfortunately, often the response to this loss of revenue is to increase the number of ads or affiliate links to compensate. But this degrades the value of the content even further and, despite the knee-jerk reaction, is not the appropriate move in a Panda-busting plan.

Bottom line: There is absolutely nothing wrong with having advertising or affiliate links on a site. That alone won’t cause a Panda issue. What can cause a Panda issue, rather, is how and how much you present these things. Ads and affiliate links should support your content, not overwhelm it.

User-generated content

What about user-generated content? Sadly, it’s getting a pretty bad rap these days. But it’s getting this reputation for the crappy user-generated content out there, not for the high-quality user generated content you see on sites. Many so-called experts advise removing all user-generated content, when again that’s one of those moves that can negatively impact your site.

Instead, look at the actual user-generated content you have your site and decide whether it’s quality or not. But like any content on the web, user-generated or not, there are different levels of quality. If your user-generated content quality is very high, then you have nothing to worry about. You could have a different contributor for every single article if you wanted to. It has nothing to do with how you obtained the content for your site, but rather how high-quality and valuable that content is.

Likewise, with forums or community-driven sites where all the content is user-contributed, it’s about how quality that content is — not about who contributes it.

If your user-generated content has both its high point and its low point regarding quality, there are a few things actions that Google recommends so that the lower-quality content doesn’t drag down the entire site. John Mueller said if you can recognize the types of lower-quality content on the forum or the patterns that tend to match it, then you can block it from being indexed by Google. This might mean noindexing your welcome forum where people are posting introductions about themselves, or blocking the chitchat forums while leaving the helpful Q&A as indexable.

And, of course, you need to deal with any spam in your user-generated content. Have good guidelines in place to prevent your active users from spamming or link-dropping. And use some of the many forum add-ons that identify and remove spam before Google can even see it.

Do not follow the advice of those who say all user-generated content is bad… it’s not. Just ensure that it’s high quality, and you won’t have a problem with Panda from the start.

Commenting

You may have noticed a trend lately: Many blogs and news sites are removing comments from their sites completely. When you do this, though, you’re removing a signal that Google can use that shows how well people are responding to your content. Like any content, comments aren’t all bad simply because they’re comments — their quality is the deciding factor, and this will vary.

And it’s not just the Google perspective that dictates why you should keep them. Having a comment section can keep visitors coming back to your site to check for new commentary, and it can often offer additional insights and viewpoints on the content. Communities can even form around comment sections. And, of course, it adds more content.

But, like user-generated content, you need to make sure you’re keeping it high quality. Have a good comments policy in place; if you’re in doubt, don’t approve the comment. Your goal is to keep those comments high-quality, and if there’s any suspicion (such as a username of “Buy Keyword Now,” or it’s nothing more than an “I agree” comment), just don’t allow it.

That said, allowing low-quality comments can affect the site, something John Mueller has confirmed. I wouldn’t panic over a handful of low-quality comments, but if the overall value of the comments is pretty low, you probably want to weed them out, keep the high-quality comments, and be a little bit more discriminating going forward.

Technical issues

No, technical issues do not cause Panda. However, it’s still a widespread belief that things like page speed, duplicate content, etc. can have an impact on Panda. This is not accurate at all.

That said, these kinds of technical issues do have an impact on your overall rankings — just not for Panda reasons. So, it’s best practice to ensure your page speed is good, you’re not running long redirect chains, and your URL structure is good; all these things do affect your overall SEO with Google’s core algorithm. With regards to recovering from Panda, though, it doesn’t have an impact at all.

“Core” Algo

One of the surprises was the addition of the core algo comment, where Google revealed that Panda was now part of the core algorithm. But what does this mean? Is it even important to the average SEO?

The answer is no. Previously; Panda was a filter added after the core search algo. Now, while it’s moved to become part of that core algo, Panda itself is essentially the same, and it still impacts websites the same way.

Google confirmed the same. It really doesn’t make a difference from an SEO’s perspective, despite the initial speculation it might have.

Overall

Google released a lot of great Panda information this month, and all of it contained advice that SEOs can put into action immediately — whether to ensure their site is Panda-proof, or to fix a site that had been slapped by Panda previously.

The bottom line: Create high-level, quality content for your websites, and you won’t have to worry about Pandas. 🙂

There’s no question that desperate measures will be needed to combat Delhi’s pollution crisis. And the Delhi government announced precisely one of these: a traffic formula where private vehicles with odd and even registration numbers will be allowed on the roads of the national capital only on alternate days starting Jan 1, 2016. It will be in application from 8 am to 8 pm, & will not be in force on Sundays. Two wheelers, women, emergency services and VIPs are exempted from this rule.

While the government says the solution is a viable means to reduce vehicular emissions adding to the foul air quality, it seems ill thought through on a host of fronts. Below are some of the queries that arise out of this decision:

Where is the public transport to handle this volume of new users? Considering that the national capital is still battling poor connectivity, it is unclear to what extent people can rely on public transport when not travelling by private vehicles.

How are lower-income households to deal with auto and taxi costs? The metro doesn’t yet connect all parts of Delhi; for lakhs of lower-income families, who may currently be using two-wheelers, this solution could disadvantage them significantly.

What happens if a non NCR vehicle is passing through in a vehicle with the ‘wrong day of the week’ number? Are residents of all states across the country now expected to plan driving through the capital – even if they’re not stopping – according to their car number?

How does the government plan to ensure these rules are followed? Do we have the manpower and bandwidth to monitor or police this massive a move?

The AAP government needs to be concerned about-

Corruption might rise as a fallout of the new road policy where people might start changing registration numbers of existing second cars.

Taxis, autos and cab operators might raise their rates.

People might start getting taxi licenses for private vehicles.

People might resort to bribing the traffic police to get away without prosecution.

How will the government ensure that the public transport, which is being added in place of private transport, is reducing emissions and not just adding more to the pollution levels?

There will be a number of concerns which will rise for women safety as people will be more dependent on public transport during late hours of the night.

What about the people who go out at late hours and are not able to return before the next day rule get implemented? That means they will be subjected to prosecution as they will be still be driving the car with a number which is not permitted to be out on road on that day.

Private companies will then also need to rejig their conveyance policies. Also, they will need to ensure putting a mechanism in place where people who might arrive late due to the public transport are not subjected to compensation.

A significant chunk of the upper-income population of Delhi use drivers. What happens as a fallout of this policy? Do drivers lose their jobs or are salaries renegotiated?

What happens if higher-income families compensate for the new rules by buying a second vehicle with even or odd numbers?

One major concern is about the period of time for which the norms will be in implementation. Is it going to be just a 15 days’ trial or will be followed there-after?

A recent report published by The Hindu citing the national census (India walks to work: Census) stated that 26 per cent people in the national capital territory of Delhi walk to work. Eleven per cent cycle to work, 26 per cent use buses, three per cent trains and another three per cent tempos, autos and taxis. Seventeen per cent of the people use two-wheeler private vehicles and 13 per cent go to office in their four-wheelers. The data is representative of inequality. At present, 70 per cent of the people are not going to their offices in private vehicles. Only 30 per cent are…

The new year is about to start after a few hours and the effects of this formula implementation will be visible within a few days. Let the time tell the answer.

Drastic changes await the banking sector in the next decade. I am confining this article to the changes happening at the international level. A separate article on innovations in Indian banking system will be posted later on. The Third part will talk about the ‘alternatives’ to banks.

While banks remain quite wrapped up in themselves, IT companies and startups are increasingly offering financial services. 10 percent of Starbucks revenue already comes from mobile financial services, Amazon runs its own application for receiving payments through mobile devices and Facebook allows its messenger users to transfer money directly to each other. Take the example of Google Wallet, a mobile payment system developed by Google that allows its users to store debit cards, credit cards, loyalty cards, and gift cards among other things, as well as redeeming sales promotions on their mobile phone. Google Wallet can use near field communication (NFC) to “make secure payments fast and convenient by simply tapping the phone on any PayPass-enabled terminal at checkout.” Banks ought to embrace innovation and learn to compete in new ways – otherwise they will slowly but surely die.

Try to imagine what the financial world will look like in a few years, and whether banks will prove capable to compete with IT companies.

Credit cards replaced by smartphones and embedded chips

Chris Skinner, author of the book Digital Bank, predicts that plastic cards will disappear in the next 10 years and be replaced by smartphones and payment chips embedded in clothing, watches and other items.

In some European countries it is already possible for customers to refuel their cars using just a smartphone. A banking application determines location of the gas station and the driver only has to enter the gasoline dispenser number, gasoline brand and amount of liters. A gas station attendant puts a gasoline dispensing hose into the tank, and a fuel supply is started automatically after receipt of money to the gas station account. Soon cars will be buying gasoline ‘themselves’ by interacting with gas station software.

The future is already here. One can pay subway fares by putting a smartphone with an NFC chip and banking application at the entry gate. No doubt, in a couple of years one will be able to do the same without a smartphone just by virtue of linking a credit card NFC tag to the NFC ring. To withdraw money from an ATM, one won’t need a bank card – it will suffice to log into online banking using a smartphone, then scan a QR-code and get access to the cash withdrawal menu.

Skinner predicts that a new economy will be based on chips and online payments with a share of cash not exceeding 30 percent. However, even the most advanced governments have not succeeded to completely eradicate cash payments: e.g. in Sweden, the volume of non-cash payments has reached only 70 percent.

Bank branches will turn into showrooms

The main functions of 20th century retail bank branches were focused on cash transactions – depositing and withdrawing.

In the 21st century, transactions are going online and bank branches won’t be needed eventually. Why stand in line if there is a mobile application to use and a call center to contact? In the future, bank branches will be like showrooms, where customers are taught to use mobile banking and new products are presented.

Such companies already exist: in 2012 mBank in Poland came up with a new digital social bank architecture. Its customers can make payments via Facebook as well as use video services and so on. The bank closed down almost all of its branches, while the costs of maintaining old infrastructure were redirected towards new services and advertising. As a result, 75 percent of the bank’s existing customers have switched to the new convenient online platform.

Atom is another example of a digital bank. This year, the British financial institution received a banking license and is currently preparing for general launch. Atom will provide services exclusively via mobile applications and wearable electronics. To open an account a customer will need to download the mobile application, register, select the account type, submit an ID photo and provide personal profile details.

Cooperation with sellers of goods and services

Banks have something that Google, Facebook and tens of thousands of online stores don’t – access to user’s credit cards.

Sellers of goods and services can only guess what customers are doing outside their marketplaces. For example, the sellers of travel goods don’t know that their customer has just bought a ticket to Singapore, while a jewelry store doesn’t know that their loyal customer’s wife has birthday tomorrow. If sellers had such information, they would offer to sell a suitcase to the first customer and a necklace to the second one (Will the wife still be satisfied, that’s a different question).

Banks have all of this information, but they cannot share confidential data openly. However, this ban does not apply to anonymous data.

Financial institutions will earn money by cooperating with companies. This is already happening as follows: “Hello, bank, I have 4 bottles of Vodka (not related to the popular song of Honey Singh) and I need to sell them ASAP. See which of your customers buys alcohol and offer them discounts in partnership with me. We will split the revenue”.

One of the largest banks in Eastern Europe – Ukrainian PrivatBank already applies this scheme.

Intelligent costs tracking system

Technology makes banks more human. According to Skinner, soon they will recognize customers and anticipate their actions. That’s what awaits us in the future: you post on Facebook: “It would be nice to go to the movie Star Wars: The Force Awakens” and soon get a comment from the bank: “You can afford a ticket, and we have found one for you”.

Or you post on Twitter: “I’m thinking about buying a Lamborghini car” and the bank sends you a private message: “Are out of your mind? You’re already $25,000 overdrawn.”

The bank of the future will have much more customer information than today. Bankers will know the probability of a person losing his or her job (or on the contrary – of being promoted), as well as whether his or her salary will remain stable or even increase. New technologies will help make decisions on granting loans automatically and individually for each person.

API era

Each bank has a variety of software systems developed by different generations of developers. As the years go by, codes grow to hundreds of thousands of strings and innovation is becoming increasingly difficult. Competing with IT companies is possible by uniting this ‘zoo’ of services into a single system using an API and a digital core.

Therefore, experts and journalists are now talking about a new era in software development. If the earlier priority was user interface, nowadays this has become an insignificant matter. First you need to discuss the API architecture, and what eventually becomes the front-end is not so important.

Banks need APIs to create their own digital core and to better interact with customers. A great example of innovation in this field is provided by Fidor Bank.

The financial institution has recently received the Global Banking Award for the API platform that allows customers and partners to connect directly to the services of the bank. Based on this technology, customers can transfer money via Twitter, trade crypto-currencies and provide services to third parties using the bank’s platform. In Germany, there is already a common API, which customers can use with any bank in the country. A similar system operates in Poland – authentication at one bank allows opening an account with another.

All calculation will be cloud-based

According to Forbes, banks are actively transitioning to cloud technology and soon this process will take over. Modern financial institutions increasingly resemble IT companies and need powerful computer centers for that.

The first steps have already been made: in summer 2013 the Dutch bank DNB authorized the use of Amazon Web Services for a number of banking services, including websites, mobile applications, retail banking platforms, high-performance computing and analysis of credit risks. Cloud solutions are also used by other global banks, including Dutch bank Robeco with assets of 8 billion USD, the sixth largest Spanish bank Bankinter, Suncorp Bank Australia and others.

So, what will the bank of the future look like? IMO, It will either cease to exist or will transform to a large extent.

I decided to write upon this issue as during the Chennai floods I saw a strange situation. This is partially linked to the liquor culture in Tamil Nadu but mainly to the role that TASMAC plays in alcohol sales in the state.

When the entire city still remains waterlogged, river water is on main streets, dams are overflowing, 100 yrs record of rainfall has been broken, all subways are closed, electricity supply is yet to be completely restored, people are struggling for food and relief materials provided by various agencies, majority of shops remain closed or prices being sky high, victims are stuck in flood disconnected from entire city and rescued by army, navy, air force and NDRF , trains, flights, and bus services are still to become active again, cab services are unavailable, there’s problem with drinking water supply & mobile networks, ATMs have been shut down due to unexpected/excess money withdrawal, traffic congestion is noticeable everywhere, the city is yet to come to normalcy, around 300 people are dead till now, and Rs. 940 crores has been released by central govt (more money coming via relief funds and donations), there’s one thing that remained unaffected during this national disaster, the sale of liquors !!

What I saw is that the TASMAC shops remained opened throughout the crisis, with stocks of alcohols never going empty and drinkers creating ruckus in the nearby places. State Govt. authorities don’t have time to open relief centers, but they’ve time to sell liquors during this crisis. As on today, 7th of Dec. (1:30 PM), one can check that #closetasmacduringreliefwork is trending on number 3 amongst all the Twitter trends in India. To understand why, read the rest of this article.

The Tamil Nadu State Marketing Corporation (TASMAC) is a company owned by the Government of Tamil Nadu, which has a monopoly over wholesale and retail vending of alcoholic beverages in the Indian state of Tamil Nadu. As of July 2015, it sells 45 lakh cases of India Made Foreign Liquor and 21 lakh cases of beer every month.

File Photo: Outside a TASMAC shop in Mylapore, Chennai

TASMAC was established in 1983 by then Chief Minister M. G. Ramachandran (MGR) for wholesale vending of alcohol in Tamil Nadu. It is wholly owned by the government of Tamil Nadu, coming under the purview of the Ministry of Prohibition and Excise. Read the entire history and related materials at:

And what are the effects? As per Wikipedia, Tamil Nadu ranks first among the states of India in alcohol sales by volume. The monopoly trade has led to widespread irregularities like adulteration, corruption, overpricing and black marketing in the retail outlets. It has also led to increased complaints about disturbances created by drunk patrons from residents in areas where the retail outlets are situated. High retail prices (due to a higher tax rate) and absence of a wide range of choices have led to a thriving alcohol tourism industry in the neighboring union territory of Puducherry, where alcohol prices are lower and different brands are available. Social impacts aren’t to be forgotten here…

And now when Tamil Nadu is witnessing the mass devastation caused by flood, relief operations is adversely affected by hooliganism created by alcoholics. News reports are coming in that relief trucks are robbed, and woman volunteers have been harassed by some drunkards near TASMAC shop in West Mambalam.

My question to all readers belonging to Tamil Nadu is: Why does the state need TASMAC revenue, when that revenue isn’t used to help us? With so much water still around, can’t the government make it a “dry day” for a few days? 🙂